Newsroom

Auction Pledge to Broadcasters May Be Too High for Wireless

Bloomberg Technology

June 29, 2016

U.S. officials announced a price tag of $86.4 billion for TV station airwaves being sold in a government auction, an amount that wireless providers may balk at -- sending the process into a second round.

The figure from the Federal Communications Commission amounts to a pledge to pay TV station owners such as Comcast Corp.’s NBCUniversal, 21st Century Fox Inc. and CBS Corp. for giving up airwaves that are to be sold to wireless providers.

Some broadcast shares jumped. Nexstar Broadcasting Group Inc. shares rose 5.7 percent to $47.81 at 12:24 p.m. Wednesday, the biggest one-day surge in four months. Sinclair Broadcast Group Inc. was up 4.5 percent to $30.25 and Media General Inc. jumped 2.4 percent to $17.20.

Now the months-long auction turns to the next phase when wireless providers such as AT&T Inc. and Verizon Communications Inc. will bid to buy the frequencies and convert them to carrying smartphone signals instead of television shows.

The figure exceeds many pre-auction estimates of bidding by wireless companies. If their spending falls short of the pledged amount, the FCC will extend the auction and try again, this time paying broadcasters less.

Fact, Logic

“Just because they say they want $86 billion doesn’t mean they will get it,” said Roger Entner, of Recon Analytics LLC. “It shows how fact and logic have left the building. No one in their right mind can think the carriers and whatever others are going to come up with $86 billion.”

“Time for the wireless industry to step up,” Rick Kaplan, general counsel of the National Association of Broadcasters trade group, said in a tweet.

The sale is designed to help meet growing demand from smartphone users by employing airwaves now occupied by TV stations, which will receive payment in return for voluntarily giving up frequencies. Broadcasters in many cases can stay in business by sharing airwaves with other stations, or moving to new frequencies.

FCC officials have called the auction a “once in a lifetime” opportunity for TV companies. Since May the FCC has conducted more than four dozen rounds of bidding, progressively lowering the price pledged to station owners to winnow the field to just those needed to clear the agency’s target for freed airwaves.

Rare Opportunity

Gary Epstein, who leads the FCC’s auction team, said in a statement that there was “strong participation from broadcast stations.” He said wireless bidders now have “the opportunity to compete for this beachfront spectrum to meet America’s growing mobile data needs.”